Tanzania's Sh13 trillion agricultural scheme faces hurdles

Dar es Salaam. The private sector has identified hurdles it experiences when participating in the implementation of Tanzania’s Second 10-year Agricultural Sector Development Programme (ASDP II).

The snags include high transportation costs of agricultural produce; inaccessibility to farm inputs and lack of affordable loans.

To steer the ASDP II, the private sector is expected to contribute 59 percent of the funding required for the programme. But players say they need an enabling environment first.

The Sh13 trillion project launched in 2018 has as its major aim increasing productivity and production in agriculture; allowing supervision of land and water resources; adding value to agriculture, livestock and fisheries products.

However, much as the private sector players say they remain committed to its implementation, they are still haunted by major hurdles that hold them back in participating fully, thus threatening the programme’s success.

Tanzania Private Sector Foundation (TPSF) executive director Godfrey Simbeye said the private sector was looking for return on investment and to do that they needed a conducive environment to invest their money in the sector.

Mr Simbeye says that, while the private sector is still on-board - and is committed to developing the programme - they need government’s quick response to solve challenges and attract more investments.

“The country lacks strong developmental financial institutions as the available two lenders are undercapitalized,” he said.

Tanzania Agricultural Development Bank (TADB) and TIB Development Bank are the only development financiers.

He called on the Bank of Tanzania to put up regulations that will allow them to enter into partnership with international financiers like the European Investment Bank among others to enable them get adequate capital.

He said the African Development Bank (AfDB) could also be an option for financing the private sector but the challenge was the bank only financed projects that were not less than $10 billion.

For Tanzanians to be able to access the finance from AfDB, he says, it is advisable they enter into partnership to implement large projects.

However, the Tanzania Bankers Association chairman, Abdulmajid Nsekela said financial institutions are issuing loans for the agricultural sector but major challenge is how to award credit to those that are unstructured.

“The majorities are unstructured and it would be a challenge to financial institutions to issue credit without having assurance how it would be paid back,” he said.

On his part, the Southern Agricultural Growth Corridor (Sagcot) chief executive officer, Geoffrey Kirenga, said the government has worked hard to ensure farmers are empowered with loans through TADB.

However he said, it was imperative farmers looked at alternative sources of getting finance including assessing finance through equity fund or capital markets instead of just relying on banks.

Responding to the concerns, the deputy minister for Agriculture Omari Mgumba said the government has accomplished some of its targets including having increased the use of fertilizer in the country from 300,000 tonnes to 686,000 tonnes annually.

“We have been able to accomplish vital components in the first programme that are investing in the infrastructure for irrigation by Sh99 billion, investing in the value addition component by Sh56 billion as well as investing in by $33.5 million that are outside the budget programme,” he said.

Reports show that the government was expected to allocate a total of Sh948 billion in the financial year 2018/19, with another Sh1.2 trillion from the country’s development partners.

Mr Mgumba said the government has built many industries including a sugar factory in Bagamoyo that is expected to be finalized anytime soon, sunflower oil factory, fruit juice factory among many more that are scattered countrywide.

On financing from the private sector, he admitted that the local financial institutions lacked capacity for financing the agriculture sector.

“We require the private sector to finance infrastructure like plants and ponds for irrigation projects among others,” he said. In view of that, he said the government was putting up a good business environment that will attract foreign investors who are able to attract low interest loans from international financial institutions and invest in the programme projects.

The project is to be implemented by five ministries including the agriculture and livestock and fisheries. Others are regional administration and local government, industry, trade and investment, land and human settlement as well as water and irrigation.